Response to the publication of the Cost of Energy Review

Responding to the publication today [25 October, 2017] of the independent Cost of Energy Review by Professor Dieter Helm, CBE, Bob Ward, policy and communications director at the Grantham Research Institute on Climate Change and the Environment and the ESRC Centre for Climate Change Economics and Policy at the London School of Economics and Political Science, said:

“The Helm Review contains both good and bad recommendations which reflect Professor Helm’s longstanding beliefs about the UK electricity system.

“It is right to highlight the need for a strong and uniform carbon price across the UK economy to confront fossil fuels with their real costs and to help correct the distortions in the electricity market.

“However, the Review also, predictably, calls for renewable electricity generators to be responsible for managing the costs of intermittent output. This would require, for instance, the owners of offshore wind farms to enter into arrangements to provide power to the network from alternative sources when wind speeds are too low to do so. This would be likely to create unnecessary additional costs, however, as balancing costs arise at a system level rather than for individual wind farms.

“Nonetheless, renewables with variable electricity generation output, such as wind and solar, do create further system costs. At present these costs are socialised and not directly borne by renewables generators. In future, it is possible that they could be reflected in the network charges faced by variable renewable generators. This would improve cost-effectiveness much more efficiently than requiring individual wind or solar farms to balance their output.”